Unemployment Rate Unexpectedly Drops To 9.7% In January

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With employment in the construction industry showing a notable decrease, the Labor Department released a report on Friday showing an unexpected drop in total employment in the month of January. At the same time, the report also showed a surprise drop in the unemployment rate.

The report showed that non-farm payroll employment fell by 20,000 jobs in January following a revised decrease of 150,000 jobs in December. Economists had expected employment to edge up by 15,000 jobs compared to the loss of 85,000 jobs originally reported for the previous month.

However, the Labor Department also said that the unemployment rate unexpectedly fell to 9.7 percent in January from 10.0 percent in December. The decrease surprised economists, who had expected the unemployment rate to remain unchanged at 10.0 percent.

With the unexpected decrease, the unemployment rate fell to its lowest level since a matching rate in August of 2009, although it still remains at a historically high level.

The unexpected decrease in the unemployment rate came as the household survey showed that the number of people employed rose by 541,000, while the number of people unemployed fell by 430,000. The drop in the unemployment rate was partly offset by an increase of 111,000 people in the labor force.

The household survey provides a broader picture of employment including agriculture and the self employed.

A loss of 75,000 construction jobs contributed to the unexpected decrease in non-farm payroll employment, with the loss of jobs in the construction industry partly due to unseasonably cold temperatures hitting much of the United States.

While the transportation and warehousing industries also cut 19,000 jobs, employment in the retail sector increased by 42,100 jobs and the professional and business services industries added 44,000 jobs.

The increase in employment in the professional and business services industries was partly due to the addition of 52,000 temporary help services jobs.

With temporary jobs tending to lead the overall figure, James Knightley, an economist at ING Financial Markets, said the increase "offers some encouragement on the outlook for employment."

The report also showed that the manufacturing industry added 11,000 jobs in January, the first increase in jobs in the sector since November of 2007.

Additionally, the Labor Department said that average hourly earnings increased by $0.04 or 0.2 percent in January to $22.45. This follows a $0.02 or 0.1 percent increase in December.

Looking ahead, Knightley said, "We suspect that census hiring will lead to better payrolls numbers in coming months, which may help to support confidence and therefore spending."

"However, with initial jobless claims data disappointing and ISM employment indices adding to the mixed messages we have been getting on the labor market, there is still nothing to signify a rapid turnaround in employment," he added.

With employment in the construction industry showing a notable decrease, the Labor Department released a report on Friday showing an unexpected drop in total employment in the month of January. At the same time, the report also showed a surprise drop in the unemployment rate. The report showed that the unemployment rate fell to 9.7 percent in January from 10.0 percent in December. (Market News Provided by RTTNews)